In today's Wall Street Journal, Sarah Rubinstein reports on the growing trend of health insurers....raising premiums in order to boost profits. Is there light at the end of the tunnel?
"The high cost of health insurance has aggravated patients and employers and generated plenty of debate on the campaign trail. But there’s one constituency that tends to stomach price hikes just fine: investors.
One giant health insurer that’s certainly aware of the phenomenon is WellPoint, which has seen its profits drop 17% so far this year after underestimating how quickly health-care costs would rise. In an attempt to regain investor’s confidence, CEO Angela Braly has been boosting the monthly premiums that customers have to pay for WellPoint’s plans — in some cases quite a bit.
The result: In the first six months of the year, WellPoint lost 189,000 members in the business and individual plans that it insures, the WSJ reports this morning. The company projects an additional overall 150,000-member decline by December. Other corporate clients are shifting more of their costs to employees, to lessen price increases. Meanwhile, WellPoint’s share price has recovered somewhat since it plunged after the company cut its earnings forecast in March, but it’s still off around 40% this year.
Kenneth Goulet, head of WellPoint’s commercial-business division, says it would be irresponsible to set premiums that cut deep into margins or lose money. “That’s not sustainable,” Goulet says. “We’re developing products that meet the needs of customers, then pricing them with very good discipline.”
The WSJ notes that the conundrum of how to reassure investors that profit will be maintained without losing business is confronting the entire health-insurance industry. Other major insurers that have reported enrollment losses in employer plans since the first quarter include UnitedHealth Group, Health Net and Coventry Health Care."
One giant health insurer that’s certainly aware of the phenomenon is WellPoint, which has seen its profits drop 17% so far this year after underestimating how quickly health-care costs would rise. In an attempt to regain investor’s confidence, CEO Angela Braly has been boosting the monthly premiums that customers have to pay for WellPoint’s plans — in some cases quite a bit.
The result: In the first six months of the year, WellPoint lost 189,000 members in the business and individual plans that it insures, the WSJ reports this morning. The company projects an additional overall 150,000-member decline by December. Other corporate clients are shifting more of their costs to employees, to lessen price increases. Meanwhile, WellPoint’s share price has recovered somewhat since it plunged after the company cut its earnings forecast in March, but it’s still off around 40% this year.
Kenneth Goulet, head of WellPoint’s commercial-business division, says it would be irresponsible to set premiums that cut deep into margins or lose money. “That’s not sustainable,” Goulet says. “We’re developing products that meet the needs of customers, then pricing them with very good discipline.”
The WSJ notes that the conundrum of how to reassure investors that profit will be maintained without losing business is confronting the entire health-insurance industry. Other major insurers that have reported enrollment losses in employer plans since the first quarter include UnitedHealth Group, Health Net and Coventry Health Care."
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